Market managed to close the gap and also maintain the current level above MA(50). But does that constitute change in trend or possible start of new trend?Lets see if charts provide us with any further clues...

Below chart is providing a very important clue:

Nifty crossing MA(100), however MA(100) remains below MA(200) - As we can see, Nifty is barely crossing MA(100) which is the 1st positive sign if this trend will be reversed. It will take some time for MA(100) to climb above MA(200). Nifty absolutely needs to remain above MA(100) for a successful trend reversal.

McClellan Index well below EMA(59), however it appears to be flat - Suggesting that although more stocks are declining compared to advancing, we might find balance soon as the index is flattening out.

This chart provides some early signs of trend reversal might be in the cards in coming weeks ahead, however we do not have confirmation yet.

Below daily Nifty chart displays gap closure along with support provided by MA(50). The next resistance is near MA(200) which shall decide the fate of this bounce and long term trend.

Weekly Nifty chart below has not changed much. Overall RSI, MACD and PPO trends are down for now.

As mentioned above, fate of this rally very much depends on the resistance offered by MA(200). But unless we get confirmation, it would be wise to stay on the sidelines as the downside risk is much more than the rewards at this time.

What does it mean for our Investments?

Mutual Funds - If still invested in equities then watch if market can sustain this rally. No reason to continue SIP at this point unless we get some confirmation. If in cash/ FDs/ liquid funds then it is wise to wait for next low risk entry.

Stocks - ONLY invest in strong patterns with good earnings guidance and DO NOT forget to have STOP LIMIT on open positions. When market is in correction, it will drag everything down with it. Check out our trade size calculator to manage your risk along with potential buy candidates watch list.